Transcript: Peter Mueller Founding Partner Breakwater VC about Pre Seed Investing in Seattle Tech Startups

Host:  Hey Peter, welcome to Startup Projects. Thanks for coming on the show.

Guest: Thanks for having me.

Host: Uh so we, you know, keep meeting each other in the early stage investing ecosystem here in Seattle, uh, and I thought it'd be interesting to have a conversation about Seattle, investing, startups.

And I think it's you know, as good of a time of as any, and especially because we have a good announcement to make. Uh, so welcome to the show.

Um, and before you know, getting into your fund and what you're doing in the Seattle ecosystem, uh, can you give the audience a little bit about, you know, your background, your career till now?

Guest: Yeah, absolutely. Uh, started my career in in kind of pure play financial services with uh Bank of America, Merill Lynch securities.

Then, you know, I I I think it was weird being in equity research and seeing sales and trading desks disappear, and then, you know, doing initiating coverage reports on tech companies that had only been around for five years and next thing you know, they're going public and generating 100 million of revenue.

And and there was this thought in my mind of and and I had I had friends in San Francisco, and they all seem to be having a lot more fun, and I I wanted to get into that building side rather than and a little less on the kind of analysis side.

I then shut out to bought a one way ticket to San Francisco, ended up uh interviewing at a bunch of places and really resonated with a small company um, where I think I could I thought that I could have the most impact, and that was E shares. That E shares then became Carta. I helped I was a product manager on the 409A and and kind of valuation side and helped build out that business segment. Um, then had some uh turned out into private equity for several years. And that that was also a weird experience. It was this, you know, I I was the, I was the first hire in in uh a fund, a roll up fund that we we concentrated on several different verticals. But I I was always the guy saying, well, why don't we procure software or build software around this? Why don't we? I kept taking this framework of success that had worked to Carta and tried applying it to lower middle market and middle market PE. And I think at that time there was still sensitivity around operating expenses when it comes to software. I think private equity's changed a lot in terms of procuring and leveraging software, but I kept banging my head against the wall and again I wasn't with, I wasn't with the builders, I wasn't with the innovators and and kind of wanted to get it out of that and then made my way to Seattle. I would I I was, I never thought I would end up here. It really wanted to. I was incredibly bullish on the region mainly due to the fact that I started noticing tech the talent density was reaching similar levels uh that the Bay was in kind of early to mid 2000s. the the biggest indicator of that was, you know, Seattle was a dev shop for a while. There was a lot of people that set up shop uh satellite offices here to poach a lot of the talent out of Amazon and Microsoft, but it was very, very dev heavy. And then I would say around 15 or 16, if not a little bit earlier, then you started to see product, then you started to see sales from from satellite offices and it really became Cloud City at at and really solidified that, but it was still dev heavy. And then in say 15, 16, I started to see this specialized division of labor start to occur where you started to have people that specialized and say, you know, growth hacking for a series A company in e-commerce, right? We, we need more of that. The Bay has that and that's like a kind of a competitive advantage of the Bay is just that density and division of labor, but I started to see it made my way up here. Uh, started with C change, became partner in 21, and then ran that with my business partner Will and shut that down in in June, deployed all the capital. We continue to manage the portfolio companies and launched Breakwater that that same month. And uh, yeah, it's been, it's been a wild ride in this this market, but a rewarding one nonetheless. Host:  You know, what happened in 2015, 16 that changed the game for Seattle?

Guest: Yeah, I I think it's, I don't know. I I maybe you could tie it to, you know, the California flight, but that that wasn't a big thing. That was more much more of a Covid and post Covid thing. I I don't know.

I think, there's a it's hard to put a finger on what exactly is is kind of causing that, but I I would fair to imagine that there was enough startup critical mass, enough companies in Seattle that had those opportunities to where someone can split off from a big company and and move into more of a specialized position in a startup.

Um, That's still an issue in Seattle. So one one thing that I very much believe is that we're, we're missing this middle layer in Seattle. And that's holding back a lot of the ecosystem.

Host:  So what what is a middle layer?

Guest: Well, a middle layer are a good amount of A, B and C and D companies. We have some, but we don't have a ton.

And what what hinders this ecosystem is one, the the capital, the lack of capital being deployed a precede and seed is not helping and we can riff on that later.

But I think more importantly, if we're truly going to leverage this highly skilled uh pool of labor that we have in this region, then we need to provide and provide is a weird way of putting it, but we need that middle layer of tech companies so that when someone is like, yeah, I'm going to try my hand instead of marketing for a large organization.

I really want to do startups and you're a late 20, early 30s something and you jump into it. It's great. It's working well and let's say that shuts down.

Well, now your opportunities are like a handful of startups in Seattle or a remote job with another startup somewhere else, or you have to go back to Microsoft.

And what ends up happening is that there isn't that compounding of knowledge and experience in working at startups because of the lack of opportunities to hop to another company.

So we're not, we're not properly giving enough opportunity to employees that want to be in startups and and it's really due to the capital funding.

If you look at capital injection at precede and seed compared to other ecosystems, we're, we're swinging well below our weight in terms of what we could be doing.

Host: I mean, I think Seattle on paper has everything to be number two in all categories, right? If not number one.

Guest: Mm-hmm.

Host: Um, because you have Amazon, Microsoft, because depending on the date, top three most valuable companies, you have all kinds of talent here. Uh, they're required talent, you have a great university, ecosystem as well.

Uh, so on paper it looks like you should, we should have the second most at least top pre-seed uh ecosystem, but that's not the case. Um, and I think we ranked fifth in pre-seed funding if I'm not wrong recently uh, for the last year.

Um, before getting that, can you talk a little bit more about C change and how that was operated? And I know like C change was slightly different than a regular pre-seed fund. Can you talk a little bit more about that?

Guest: Yeah, so C change was an annual fund, committed capital and it it was an attempt to inject the ecosystem with uh you know, typically risk averse angel capital and there were full-time managers that were tasked with everything from origination to execution to support.

And LPs were provided decision making power at several points of kind of the deal execution workflow. So top of funnel, uh middle of funnel and and then the final investment decision.

Um, there were certain samples of the LP base that were at top of funnel and mid funnel and then at final investment, the the entire LP base would vote on um, whether or not to do the investment.

It it worked great in terms of allocating capital, but I think what we ended up doing is we we looked at the loss ratios at the the end of the fund and they were fantastic.

Fantastic in the sense that we looked like a middle market, lower middle market private equity shop rather than a true VC fund.

Um, and and I think that that's an empirical way of showing the risk verse nature that we had as as a fund in making decisions, right?

I think a lot of people in this ecosystem at at the pre-seed and seed stage like to see all the boxes checked off and what you end up self-selecting for there are founders that have everything figured out rather than constantly experimenting and and really creating velocity.

At the end of the day, we weren't investing in velocity and don't get me wrong. We we had great returns, but it wasn't it wasn't what a venture fund should be doing in a very risk capital risk on asset class, especially a pre-seed and seed.

Host: So C change was technically not a syndicate, but having run syndicates, because syndicates don't have committed capital. I mean, in case in your case you had committed capital.

Um, it's actually very tricky to do investing in such, you know, um where a lot of people are not in decision making is what I came to conclusion because one thing is when you have a strong um conviction on something, you cannot translate that across a group.

Number one, because if it is a conviction that no, you know, people don't agree, that's a bet worth taking in venture because venture technically is risk capital, right?

But when you are trying to convince a syndicate of folks to invest in your conviction, it's it doesn't always translate.

That means you cannot really confirmly tell the founder that you're investing even though you really, you know, know that this founder is exceptional.

You like the thesis and everything and you see the vision, but as a person who's not making the decision and since the capital is not committed, um it becomes really tricky and challenging.

So for anyone who tries to do a syndicate, my advice is always like go and go through the hard work and just do a fund.

Guest: Right.

Host: Right?

It's much more easier when you have that committed capital and when you can make that decision because you're not not only risking the decision, but you're also risking your reputation with the founders because you want to invest, you tell them that you can invest, but then what if the group doesn't agree with it?

Right. So you're also like risking your reputation. So No, and and go ahead. Go ahead.

Host:  So I sort of conclude that, you know, if anyone is trying to do a syndicate form of investing, yeah, you can be a participant and if you like it invested, but starting a syndicate is actually a very tricky business and it doesn't scale well.

Um, and in in your case you had obviously committed pool of at least LPs, that was slightly easier, but the regular syndicate model actually is much more harder than I I think by structure itself you can never get good exits.

Guest: Yeah, absolutely. And and the you know, what what is angel investing in other markets? And what is angel investing in Seattle?

Angel investing in other markets is typically, hey, hop on a 45 minute to an hour call with a founder, either have a decision by the end of that or maybe line up one or two additional calls.

Um, that's the typical MO for what an angel investment is outside of Seattle.

In Seattle and I I would include other other geos in this, but I think it's very true for Seattle is an angel investment is now a two month due diligence process with pro formas associated with it. I It's it's kind of ridiculous.

I think there needs to be some re-education around what is a true angel investment. And I I would say a recalibration of of what risk tolerance means and how important it is at pre-seed and seed.

The the most important thing is and you touched on this was you're building a relationship at pre-seed and you have to see things in the founder. in this business we bet on the jockey, not the horse, right?

And it is hard to share what you're seeing in a founder when you have to just translate it to either a CV or resume or a proformer or a deck because you're the it's a very personal endeavor early on to invest in a founder.

It's not a it's not a heavily analytical thing and don't get me wrong, we still, we still do a lot of analysis in our due diligence processes, but it's at the end of the day you're building a relationship and that the weight of that relationship and what you see in a founder cannot be easily transferred in a quantitative or in any sort of deliverable, unless you throw your your thoughts into a long memo, but even then reception is probably not going to be as good as you would like it.

Host: Yeah, I I I don't think even a memo really translates and become into convincing the group. Uh, you know, like like you're seeing things. And you you brought up a good point.

Um, I think some of this angel investing in Seattle is done in almost like a small to mid private equity sense where you're evaluating cash flow, where you're evaluating business model, while if you're purely looking at pre-seed venture investing in tech companies, that's not really the mental model you should be looking at because at pre-seed you have to expect that there is no business model yet, right?

Um you will eventually create some leverage using technology and create a business model worth a billion dollars, right? That's that's the ultimate goal.

But I think we sort of come and traditionally a lot of uh incubators or um syndicates or groups that are investing or doing angel investing, sort of create this notion of, you know, you have to eliminate all the risk, while pre-seed is like the most risky bet that you're taking.

So you're like perception of what type of risk you're actually getting involved is also changed.

Guest: Well, it if you like look at the levers of wealth creation in this region, right? Microsoft was the second largest wealth creation event behind the Holy Roman Empire. And that's great and and it's a good thing, don't get me wrong.

But you have to think about, okay, what what were the mental frameworks that helped a lot of people generate their wealth and got them to where they are?

If you're in a corporate environment and you're making a decision with 80 to 90% of the data sitting in front of you and that works for a corporate environment.

But if you're to use that same mental framework in assessing a pre-seed and seed opportunity, it's hard.

You it's it's very difficult to do and I think the there there are some people that can do it, but there are many that still kind of bring those well, hey, I need to see 80 to 90% of the data.

And then when what ends up happening is that I think you do get a lot of founders that are like, okay, I'll put together a five year proforma for you if that makes you feel better.

And it sends a lot of angel investors given, I would say the education that they've been given as to what angel investing looks like. They have uh paralysis by over analysis.

They'll they'll spend more time in a made up pro forma assessing the business's ability to generate revenue and therefore returns than talking with the founder and understanding how they're thinking about the market, how they're thinking about product design, how they're thinking about their the end user and and making them happy, which is much more important than any made up pro forma that is let's be honest, 99% chance not even going to be close to what the business actually does in terms of revenue and expenses.

Host: You saw a problem, you're fixing it. Uh, we don't have a great pre-seed ecosystem in Seattle. Uh, so with Breakwater, what is the thesis behind it and uh what type of companies are investing in?

Guest: Yeah, so the thesis we're we're compounding our learnings from C change as well as our networks.

What we were observing at C change for a bunch of great deals that we had the opportunity to allocate into, but uh, at the end of the day, we were, we were restricted by the decisions of our LPs on certain investments.

And and that came down to kind of risk aversion. So there's a ton of opportunity here.

There are incredible founders here and across the region and they need capital and it's not coming from from an individual angel ecosystem that that's supporting them and propping them up. So for us, we saw it as an opportunity.

We've been in market for eight years, our networks help us. We we have a great visibility and access. Um, but we need to attack it with with better decision making and uh institutional rigor and institutional capital.

So we're investing in mainly Fintech, AML, uh marketplaces vertical and that's those are the main pillars. At the end of the day, if you're a software centric founder, I will absolutely talk to you in Seattle.

Uh, I don't want too many dumb rules to prevent me from seeing a great deal and backing a great founder. The other aspect is also Vancouver.

There's if you look at the fastest growing offices for the large tech companies, they're in Vancouver and they're in Toronto. Why is this?

So H1B issuances have gone down significantly over the past eight years and what that's done is it's sent a ton of, oh my gosh, I pardon me. Okay, we'll refrain here. Sorry.

This whole this whole past three minutes is going to be uh an editing nightmare for you. Uh, we're really interested in Vancouver because if you look at H1B issuances over the past eight years, they've gone down dramatically. So what does that mean?

It's there's been a ton of international labor that is now housed in Vancouver and Toronto and Western Canada uh that is world class but can't come to the United States and start their company. And a lot of them are very entrepreneurial.

If you look at the fastest growing hubs for major tech companies in North America, all of the hubs that are experiencing the greatest growth are in Canada due to this large immigration surge.

So at C change, we started seeing interesting deal flow come out of Vancouver in 18, 19, and we pulled aside council, asked for an opinion and we wanted to understand if class A common can, if we could create some synthetic preferred share with class A common in Canada through, you know, writing inside letters.

Our council came back, said, yes, this is great. So everything will uphold and we started doing Canadian deals and to our surprise they were even more capital scarce in Vancouver than they were in Seattle at pre-seed and seed.

So that was an opportunity for us on both valuation relative to traction and that could be revenue, that could be whatever, but great entry points on valuation plus uh there there's a bit of arbitrage there in the sense that if you, if you push on them to say, hey, become a C corp with a Canadian sub, well now you're denominated in preferred shares, and that becomes a lot more attractive to the American market.

And therefore your marketability goes up tenfold, you have much more access to capital and valuations then then come to be in line.

I think the other thing about Vancouver and Western Canada is is that because of capital scarcity, a lot of these founders are incredibly frugal and very understanding of where every dollar in their business is going and that's a breath of fresh air because I think a I get a lot of pitches and founders in Seattle and abroad that it feels like they're still living in a Sir era.

And I get it, but it's it's difficult to talk to someone that's raising a pre-seed round and is trying to raise $4 million dollars. And it's like, okay, hold on.

No, not interested in that unless it's a fantastic team that has, you know, outstanding uh resumes and and proven a proven track record of success. or AI.

Guest: It well, yeah, it's it and that's that's another thing.

It's I think a lot of people think if they they slap on AI onto their pitch deck that that guarantees uh, you know, 2X increase in funds raise as well as valuation and it it it just doesn't work that way.

But anyways, I I see a lot of great things coming out of Vancouver and a lot of opportunity for us uh, not only as a fund, but also for Seattle and the Pacific Northwest as a region. A lot of them do want to come to the US and and build a company.

Uh, but we're due to uh I would say uh imperfect immigration system, we're we're not providing channels for those people to come and work here.

Host: Glad to add a data point to what you said, um, regarding H1B issue I go down. Uh, there's a lot of reason why there's a huge migrant migration from West Northwest or in general US uh is because of the green card backlog issue.

Uh, there are at least a million people waiting in green card who are high highly the highly paid tax paying legal, have been here legal for a while and a new H1B today, if they come from India and get a try to get a green card, it will take them more than 100 years to get the green card based on the current timeline.

So it's it's when someone has graduated from the US, uh even if they're studying in a very good university, they're obviously going to try to move to Vancouver or you know, some place in Canada.

Uh, because they do think that from there they can still access US markets, right? So they can start a company in Delaware and like you said, I can be a subsidiary in in Canada and still operate as a create companies just like they create in US.

So that's one big attraction why people move to Canada. Uh, Absolutely.

Guest:  And and I think what's interesting about Canada is that demographically they need immigration in order to have population growth.

And what you've seen from the government over I I would say the past five years is a lot of subsidies in creating startup, sustaining a startup ecosystem.

So there's shred credits, I know there's also provincial programs that if you are in India and you have an idea, all you have to do is show it to a provincial office and they will provide you a visa as well as office space in in some province.

So they're very they're very business positive in terms of startups.

They provide subsidies and and it's it's an aspect of their growth plan that is necessary, but they're also taking advantage of the US just tripping over themselves on on proper immigration regulation and policy.

Host:  Yeah, I mean, I always found that when I criticize US immigration policy, I don't criticize even though like I am affected by it. Um, because I've seen other immigration systems. US immigration policy works in general for 95% use cases.

It is really that only Indians it doesn't work. Uh, Well, even for Chinese, um it it works but a little bit delayed. It takes five to six years for them to get a green card.

Um, but there's the other problem of how many H1Bs you're issuing that can be increased. I think that's their next argument for them.

Uh, but in general, the way the system operates when you compare it for like the rest of the world, uh, not just Canada, I I genuinely think it actually is straightforward uh, when you compare with just other systems, paperwork everything, right?

Um obviously you can say there are some other better systems. We there's a large scope for improvement, but it really gets stuck up with Indians.

Um, it it's where like US and there there is the illegal immigration side which is a whole different topic.

Guest: Right, right.

Host: Yeah. that we I think we should not get into now. Yeah, I I don't I don't want to turn a tech podcast into a political one. Um, and I I don't think either of us do.

The I it's still, I I I know very well-paid and high-ranking people at even tech firms here in Seattle and and in San Francisco, New York that are still not full fledged citizens but close to making on a full comp basis nearly seven figures a year.

And what's odd to me is that, okay, these people are part of critical systems, critical uh aspects of our economy, but we can't bring them in to be citizens. Like they can't access credit. They can't access other aspects of being a citizen.

And it's it's that's what's frustrating to me and especially on uh you know, I think on the staffing side too, it's it's if there is someone that is highly skilled, we need to be able to provide them a pathway to come to the US.

I I think what the UK did was was very, very interesting. Albeit the bar is a bit high, but I I kind of like the direction that it went.

If you went to a top and and don't quote me on this, but if if you went to a top say 50 or 100 university in the world, bring us your degree and we will give you a visa and we will also give you an expedited path to citizenship.

We don't have that here. But for us it's an opportunity because we're we are focused in Vancouver.

We have a good network there and um, you know, one one example of of kind of this immigration hold up is in the last C change fund, we we backed an Iranian immigrant and now Canadian citizen that had a Salvo metalgic process to refine and and smelt metals that was quite novel.

Um, and and an incredible, incredible founder and he tried so hard to raise money in Canada and just had the most difficult, difficult time. We found him, we backed him and it's been it's been a fantastic investment for us.

So there and and that's one of many stories that have happened and that will happen not only through our fund but anyone else that that backs founders in in Canada and mainly in for us Vancouver and Western Canada.

Host:  Um, let's slightly shift gears. Um, let's talk about, you know, uh some of the investment trends that are happening uh and going into AI. And I think there's sort of like two worlds right now in investing.

One is like if you're a regular founder who's not, you know, added dot AI to a domain, you're not any keywords on your uh pitch deck about AI, the funding environment is completely different and if you have AI or you're doing something with AI, the funding environment is sort of different.

So there's these two parallel worlds going. Uh, so what's your macro view on what's happening with AI and what you're seeing in, you know, AI in Seattle?

Guest: Yeah, I on another funny side note, I I read somewhere that Anguila was getting now some large percentage of their government's revenue. I think it's 25 or 30% is now attributed to domain licensing because of the .ai.

I I heard that and loved it. The world is a wild and crazy place, but those stories always put a smile on my face. Uh, So, here's the thing.

I think, when AI first started to become a very much a thing, a lot of people jumped into it with with high hopes and kind of putting into place a SAS playbook for any investment and didn't really take into account the rapid amount of progress that an AI company, AI focus company can make if they're say not building their own proprietary model, but actually just using AI tools to go out there and and build product, get customers.

And and one of those things was I I started noticing that almost every pitch deck was much, much better than I'd seen in the year before and I had to check myself, okay, this isn't the execution of a founder.

They just knew the right tool to make a great looking pitch deck. But I'm I'm kind of uh getting distracted here.

There were a lot of GPT wrappers and the question that I would always ask and normally it's a question I ask later on in a call, but I ended up front loading it in kind of this early days of of Gen AI investing is that show me your architecture, right?

And if you can't show me your architecture and then I'm already going to be concerned. But if you do and I realize it's a wrapper, I'm done.

It's it's not that interesting to me unless you're say very vertically focused or hyper focused on a specific use case that has horizontal application. Um, with in that, there are great founders, but you need domain expertise.

I saw a lot of people spinning off from you name it tech company with, hey, we're going to go after this and solve this problem.

Great, who on the founding team or at the very, very least on on your advisory board has experienced either selling or building product in this market.

So there was always this mismatch of people building really cool stuff but didn't have the true domain expertise to go and execute against it.

I think now, mainly after uh open AI Dev day, there's there's been kind of a a humbling of what is actually going to take, uh what it's going to take for an AI company to really take off and and have defensibility and it not just to be a go to market endeavor.

So that's post Dev day. I think where we are now is and and this is this is hard for me. I think what what really caught me up was runway.

Runway was a team that was laser focused on a specific idea, had tons of backing and Sora comes out and it's much better than anything runway, not anything, but you could tell from the Sora videos that the fidelity that was coming out of their model, uh the output of their model was much, much better than than runway's.

And where I got concerned was how how do you compete and how do you not fall subject to the aggregation theory that is Open AI or any of these larger proprietary models. So I think there's going to be a lot of losers.

I think if you're going to be doing something interesting in this space, you have to be going you have to have an agent, a multi agent and multi modal focus on where this industry is going to end up and if you can't find a nice niche within a multi agent ecosystem, then you're not going to win.

And that can that's a two hour long conversation to get into. But that's that's kind of where I I I see AI going. Um, but I I do get concerned just through aggregation and I know runway's more on the creative side.

That's a place that I don't like to play in.

Um, but it's still a great example of my concerns around, okay, team laser focus, they're going after one product, but at the end of the day it's the power of the model and the aggregation and as well as the quality of that model that's going to win.

But can you compete from a proprietary basis or we're not going to get into those deals because I don't like investing in a company with 100 million pre at pre-seed, so to say. That's that's not where we're looking to play.

We want to find those people that have domain expertise, are hyper focused on either a specific use case or vertical and are attacking the problem set with aggression.

Host: That's not impossible for a small fund to get into those IDs small because every ID was like 30 million at 100 million pre or something like that, right?

It's always in hundreds of millions the first out sort of fund raises in hundreds of millions the many valuation.

So it's it's almost that it's only like large funds which have raised for a different purpose are actually investing at that stage, right? Um, but yeah, that was a great insight.

Um, uh, one, I think the opportunity in AI, obviously, it's a huge opportunity overall, but I think there's a big long tail opportunity for small teams.

I think non-venture funded even uh to actually, you know, create tools in the short term before you know, AI sort of goes into the mainstream.

And still, you know, like Chat GPT is one of the fastest, you know, consumer adopted product, but I think there are so many small niches uh in terms of like um, you know, helping people do these manial tasks before like all these tools get actually to a level where it is usable from the company itself.

Like Sora is itself not usable yet, but you can create something the first version of it, which can be helping someone who's making gifts, for example, right?

That that's that's an easier use case to solve than for a you know, storyboarding for a Hollywood creator, right?

So I think there's a lot of small long tail niche opportunities which will be multi-million dollar revenue businesses that can be captured by small team full stack developers.

That I think is very interesting to me to see and a lot of indie creators are jumping on this and uh scaling to like 100K or 200K within a very short span. Uh, I think you Go ahead.

Host:  I I was the timing opportunities limited on that, but it will stay for a couple of years is my thesis.

Guest: No, and and I agree with you.

I think the other thing too that AI has opened up is that there are especially for smaller funds like, hey, if you're aya, if if you're a Cliner Perkins, like, hey, run at those proprietary foundational model oriented deals. That's fine. like.

I'm not going to get enough equity ownership percentage in those deals that makes me feel capable of providing returns to LPs.

And and it's I think if you have these smaller teams that are hyper focused on specific use cases and making just a better baseline of software to where act AI can actually hit into the enterprise, that's fantastic because a lot of times these teams will only need pre-seed or seed funding to get everything off the ground and they'll be smaller rounds.

I I I think that a lot of the good founders that came after the past 15 years and have are are repeat founders have noticed that they they've jumped on to the VC treadmill too easily.

And if you do like don't get me wrong, getting backed by A16Z or Sequoia is fantastic, but you're going to be on that VC treadmill.

You're going to get a giant check at a giant valuation at pre-seed or seed and there's going to be expectations that come with that capital, but don't worry about it because we're incredibly well networked and we have your we're on your cap table and we're a great marketing piece.

Yeah, you haven't hit that valuation yet, but you haven't grown into this valuation yet, but that's fine. Here's a series A and so on and so forth. So I I think that there's there is this there's two kind of trains of of venture right now.

There are those that are still jumping on this on on the VC treadmill, which is totally fine, don't get me wrong, there are companies that need that, but I'm also I'm really biased towards founders that are, hey, I can raise pre on 15, but I don't want to because I want to see if this even works and if this has semblances of product market fit and I'm hyper focused on this specific use case or this specific ICP, right?

I really enjoy those founders and from what I've seen in our portfolio and in in just in investing is that most of the time those do much better and I also believe that it's attributed to equity ownership from the founders is much, much better at later stages when you're much more frugal about how much you raise and who you raise it from than just going for a larger round.

And I've I've heard I think we're out

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